Wizard of Ads™

Ad Budget Calculator

Reconciling your ad budget with your rent and the profitability of your average sale.

Projected Annual Sales $1,000,000
Profit Margin 48%
Markup: 92.3%
This formula requires markup, not margin. Most business owners know their margin but never their markup. They sound similar but produce very different numbers.
Margin is gross profit as a percentage of the selling price.
Markup is gross profit above cost, as a percentage of cost.
Example
1
You sell an item for
$150
2
It costs you
$100
3
Gross profit
$50
→
Margin = $50 ÷ $150 selling price
33.3%
→
Markup = $50 ÷ $100 cost
50.0%
Same $50 profit — but 33.3% margin vs. 50% markup. The difference matters.
Your Numbers
1
Annual Sales (selling price)
2
Cost of Goods
3
Gross Profit
→
Your Margin = Gross Profit ÷ Sales
→
Your Markup = Gross Profit ÷ Cost
Formula: Markup = Margin ÷ (1 − Margin)
Annual Cost of Occupancy $36,000
Rent — often your best advertising

Your Ad Budget

Minimum
$56,300
$4,692/mo
Maximum
$74,760
$6,230/mo
Your cost of occupancy has consumed most or all of your exposure budget. Your location may be doing heavy lifting as advertising — or your rent may be too high relative to sales.
1a
10% of projected sales
1b
12% of projected sales
2
Margin → Markup
3a
3b
4a
4b
Cost of Exposure Breakdown

Where your total exposure budget is allocated

"Most advertising salespeople will tell you that 5 to 7 percent of gross sales is the correct amount to budget for advertising, but don't you believe it."

— Roy H. Williams, The Wizard of Ads

 

Craig Arthur

Wizard of Ads Australia

Call +61 0417780882 or Send Me An Email